A small Santa Rosa company has stepped onto the national stage with a new way of paying for potentially billions of dollars worth of green building upgrades.
The little-known company, Ygrene Energy Fund, last week announced alliances with British investment bank Barclays Capital, U.S. defense contractor Lockheed Martin and German reinsurance giant Hannover Re. It is marketing its loan program to cities and counties across the United States.
The company's leaders include Dennis Hunter, who has made millions in local real estate, banking and waste collection, and former Sonoma County auditor-controller-tax collector Rod Dole, who helped create a similar green building program for the county.
Ygrene has received the backing of British billionaire Richard Branson's Carbon War Room, an environmental group working on climate change and energy issues. Last week, the nonprofit announced it had formed a consortium led by Ygrene to fund construction work that would cut energy consumption in homes and businesses across the United States.
Ygrene has won exclusive contracts to market retrofits in a half-dozen communities in the Miami area and expects to finalize a contract with Sacramento next week. Together, it expects to fund $650 million in projects in Florida and Sacramento.
In an interview, Hunter said a key challenge in addressing climate change involves finding the money for large-scale construction upgrades that can reduce "gigatons" of carbon emissions. To draw that kind of money, investors must be able make money, he said.
"If there's profit in it," Hunter said, "it will attract capital."
Boosters suggest the efforts of Ygrene and similar companies one day could spur the largest private investment in energy efficiency in U.S. history and create thousands of jobs in the struggling construction industry.
"Richard Branson believes this is a trillion dollar opportunity," said Murat Armbruster, a senior advisor to the War Room and director of the Green Capital Global Challenge in San Francisco.
Of Ygrene's leaders, Armbruster said, "these guys really do have their act together, and what they're talking about could be game changing."
Already, Hunter said, Ygrene officials have gone to London to share their business model. And they've been invited to France, New Zealand, Australia, South Africa and China.
The company now employs only about 15 workers, Hunter said, but has financing and plans to expand as needed.
Ygrene is building on the efforts of a fledgling movement known as Property Assessed Clean Energy, or PACE. Its key idea is to provide government-assisted loans for green energy projects — including insulation, high-efficient cooling systems and solar electric generation.
Sonoma County was the first county in the U.S. to allow building owners to put the cost of clean energy upgrades on their property tax bills, a model embraced by other communities as the program spread across the country. More than $50 million in retrofit projects have been financed in Sonoma County since the program began in March 2009.
Dole, who helped start the county's PACE program, retired as county tax collector in May and joined Ygrene, where he serves with Hunter as the firm's co-chairmen.
Under the local PACE program, the county finances the improvements by selling government bonds. Property owners use the savings on their energy bills to pay back the bonds with interest over 20 years. The pitch to owners is they won't spend any extra money to make the improvements, which will lower their utility bills and reduce carbon emissions.
Ygrene has come up with two big wrinkles to the PACE model as it attempts to market its program to cities and counties across the United States. First, it offers to finance the energy upgrades entirely with private money, not government bonds, through groups like Barclays. Second, it will run the programs without any costs to local governments, which must authorize the programs and collect payments from borrowers.
"We're the only company in the country that has those two key elements," said Hunter.
Hunter was a co-founder of Sonoma National Bank and a senior executive at North Bay Corp., the county's main garbage hauler. In 2006, he formed a private green energy loan venture with Alan Strachan, a former social service agency leader and real estate developer whose Courtside Village project in southwest Santa Rosa went bankrupt in 2003.
The PACE program, authorized by the state Legislature in 2008, created a new model to fund energy retrofits on a larger scale. Hunter and Strachan founded Ygrene in 2009 to attract private capital to fund PACE loans, which are now authorized in 26 states.
About a dozen startups across the country are pursuing similar deals, the New York Times reported last week. Several have stumbled, telling companies they qualified for retrofits but then failing to deliver the necessary short-term financing, the Times reported.
If Ygrene succeeds, Armbruster expects other businesses to form consortia because the problem is so massive that it cannot be solved by a single group.
Dole, reached in Florida where he was speaking with Tampa area officials, said Ygrene has found answers that will encourage cities and counties to adopt such programs.
"They've developed a software system that even goes beyond what Sonoma County did," Dole said. The system can more quickly help contractors learn which property owners won't qualify for the program.
Dole said there is no law restricting him from working for Ygrene. Before he left office, Dole said, he checked with the county counsel's office and was told his only restriction on outside work is he may not lobby county government for one year.
"And I would not solicit Sonoma County anyway because Sonoma County already has a program," Dole said.
Local business leaders will be watching Ygrene.
"Hunter is a serious person who has been successful in nearly all his ventures," said Santa Rosa developer Hugh Futrell. "And that should cause people to take this seriously."
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